Itunes Case Study

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CHAPTER 6: CASE STUDY Analyzing Managerial Decisions: United Airlines Margaret N. Agwuocha Saint Leo University Dr. Patricia Wiseman February 20, 2013 Case Summary The entrance of the Apple’s Computer iTunes Music Store into the digital market made it possible for consumers to buy digital music and audio books over the internet. This saw Apple’s stock increasing from $7/share in April 2003 to over $46/share in August 2005. A look at the Apple’s 10-K statement for the fiscal year 2004 shows an astronomical increase from 2002 to 2004. Apple has maintained a flat pricing policy on all downloaded music ($0.99/song). The record companies were initially happy receiving $0.70/song from Apple since prior to this arrangement, they were not getting paid for downloaded music (Brickley, Smith, & Zimmerman, 2009). As the digital market gets bigger, the record companies are getting dissatisfied with Apple’s pricing policy and are pushing for a change to a complex pricing policy, where new and popular songs will be priced higher. They have complained that Apple’s is using their music to promote the sale of the iPod since music from the iTunes store is only compatible with the Apple software. As of January 2008, all four major record companies agreed to allow sale their music in the MP3 format without the digital locks that restricts users from making copies of the songs though each of the companies excluding EMI Group requires Apple to sell their music with all the digital rights (Brickley, Smith, & Zimmerman, 2009). Analyzing the managerial Decisions 1. Apple’s sales revenue from their Music Store will be increased by the use of variable pricing. Increasing the price of more new and popular tracks while pricing the old and less popular tracks at a lower price will result in an increased purchase of the older and less popular tracks. This increase
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